Thursday, December 18, 2008

Reasons To Be Bullish

As we approach the end of an annis horribolus for the markets with great big dollops of more to come we find some reason to be bullish for traders in the coming weeks, months and years.

1. Gold. OK so it hasn't exactly been on fire recently and it certainly hasn't performed as a safe haven as we'd all expect but is there some upside to come? Citibank seem to think so.

The bottom line, according to Citibank, is that the damage caused by the financial excesses of the last quarter century was forcing the world’s authorities to take steps that had never been tried before.

This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.“They are throwing the kitchen sink at this,” said Tom Fitzpatrick, the bank’s chief technical strategist. “The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock.

“Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop. We don’t think this is the more likely outcome, but as each week and month passes, there is a growing danger of vicious circle as confidence erodes,” he said.

“This will lead to political instability. We are already seeing countries on the periphery of Europe under severe stress. Some leaders are now at record levels of unpopularity. There is a risk of domestic unrest, starting with strikes because people are feeling disenfranchised.”

“What happens if there is a meltdown in a country like Pakistan, which is a nuclear power. People react when they have their backs to the wall. We’re already seeing doubts emerge about the sovereign debts of developed AAA-rated countries, which is not something you can ignore,” he said.

Gold traders are playing close attention to reports from Beijing that the China is thinking of boosting its gold reserves from 600 tonnes to nearer 4,000 tonnes to diversify away from paper currencies. “If true, this is a very material change,” he said.

Not exactly a nice story to begin with but gold could be a play for 2009.

2. Obama Mania

No doubt that Obama is the man of the moment and in 36 days he will be Presdent of the United States. He has a tougher job than he would have imagined when he started his campaign but as they say 'Commeth the hour, commeth the man'.

Obama is set to unveil dramtic spending in the US on infrastructure and on 'green' technologies. WE have no reason to believe that he will flim flam on this so anything in this sector will look to have a good 2009.

Short term traders will be fingers poised anytime he speak after his swearing in and we predict some wild moves in the markets.

3. Autos.

In the toilet, we know. However a bailout in some way, shape or form will be done. Can you imagine a scenario where Obama's first few weeks in the Presidency is spent explaining why 3mn people have a 'change they don't believe in' i.e becoming jobless.

4. Santa is coming to town

Despite a series of storms—peril in the auto industry, soaring unemployment, tight credit conditions—stocks have managed to hold their ground. That has fueled hopes that the traditional Santa Claus rally may still happen, helped by a plate of government-sponsored goodies.

"We're looking for a six-week rally," says Kathy Boyle, president of Chapin Hill Advisors in New York. "An Obama-Santa Claus rally."

Of course, market pros say the rally could have a fairly brief shelf life, with pessimism likely to return shortly after Obama takes office amid a flurry of dismal economic news. But in the meantime, the mood is fairly positive.

5. Market Bottom?

It may seem that this is an idiotic statement, and we must admit with all the economic news it even sounds silly to us, however markets typically bottom 6 - 12 months before the economy does, so if you believe that we ae done an dusted with the worst by the end of 2009 positioning yourself now may be an idea.

Bear in mind that all of the above are just opinions, the markets are very, very hostile and the reverse of the above could easily happen so be careful, keep tight stops and do lots of your own research.

Merry Chrsitmas.
Source - HF Market - Online Trading

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